Alibaba sales surge shrugged off
Ken Odeluga November 1, 2019 7:46 PM
Alibaba’s strong quarterly story left investors cold, raising the bar for upcoming Baidu and Tencent earnings
Alibaba earnings surprised at top and bottom lines, apparently paving the way for a potentially pleasing run of earnings from the giant Chinese technology firms that will report earnings in coming days, but the shares have barely risen on Friday after the group’s quarterly report.
Here are some of the key financial details
Revenue CNY119.02bn vs. CNY116.69bn est., at top end of the range
Adjusted EPS CNY13.10, est. CNY10.66
Adjusted Ebitda CNY37.10bn, est. CNY34.49bn (range CNY28.49bn bn-CNY37.30bn
Cloud rev. CNY9.29bn, estimate CNY9.24bn
The group’s key metric of mobile monthly active users was also firm relative to expectations at 785 million, versus an estimate of 752.4 million.
Key sales themes were also positive, with the quarter buoyed by improved recommendation algos, a revamped grocery service and more appealing content, like live streams.
It looks like investors, who have already bid the stock up some 30% in a year of unprecedented uncertainty, were perturbed by comments made in a BABA’s post-earnings conference call. Vice chair Joe Tsai made clear that the group would double down on a strategy of pushing into what it has dubbed ‘lower-tier’ cities. “We can afford to be aggressive” he said. “We have the luxury”. The comments upended a rally by the stock in U.S. pre-market trading and pushed the shares lower, before they recouped to trade flattish at last look.
‘Lower-tier’ has been interpreted as lower-margin by the market, suggesting all sorts of negative optics amid a trade war that may or may not be about to cool down, depending on which conflicting headline was reported last.
Alibaba also disclosed that a one-time gain of CNY69.2bn (about $9.7bn) flattered these results. It’s linked to an equity interest in Ant Financial, the payment platform launched by co-founder Jack Ma. Elsewhere, though BABA’s cloud computing side, which competes with Microsoft, Amazon, Google and others, surged 64% in Q2, that represented a slowdown relative to prior quarters.
Perhaps the near-50% rise of rival JD.com speaks more volumes. The Beijing headquartered e-commerce group will report earnings in the middle of the month after posting record operating profit in the prior quarter. A strategic partnership with gaming giant Tencent, is also expected to drive mobile referrals via WeChat in ways that BABA has been tardy to match. Both face risks from mutual competitor Tencent, but JD’s ‘upstart’ status is currently playing better in the context of global challenges.
The market’s unimpressed earnings reaction almost certainly means that BABA’s bid to extend the year’s uptrend will continue to be challenged by zonal resistance that capped the year’s best levels in April. The September high of $183 will be the decider in the near term.
Alibaba CFD – Weekly
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.